How will IPSASB’s consults on new projects impact the ASB’s work Program?

The IPSASB consults on new projects for its work programme

The IPSASB’s current strategy outlines its planned projects for the period 2019-2023. As some of the IPSASB’s current projects will be completed during 2022 and 2023, the IPSASB would like to identify potential projects to commence as resources become available. The IPSASB is unlikely to complete these projects by 2023 and would potentially run into the next work programme cycle.

How does this affect the ASB?

Like the IPSASB, the ASB consults on its work programme. The ASB will begin consultation with its work programme for the period 2024 to 2026. The consultation on the work programme will start in October 2021 and continue into 2022. Some of the IPSASB’s completed projects (or those expected to be completed in the next two years) have been included in the ASB’s work programme consultation. As the projects that the IPSASB has identified above will only be completed in the future, they are not included in the ASB’s list of potential projects.

Although these projects are not identified in the ASB’s work programme for 2024 to 2026, providing the IPSASB with feedback about important areas affecting the public sector will add relevance to the ASB’s work in future. It is important to consider the IPSASB’s proposals and provide constructive feedback on its major and minor projects and provide feedback on the other projects it considered. The list of projects considered by the IPSASB is included in this Exposure Draft.

 Proposed projects

The IPSASB has identified both major and minor projects that it believes it could progress. These are as follows:

Major projects

Presentation of financial statements

How financial information is presented to users is important in making the information useful. This project will revise the overall requirements for  presenting financial statements, guidelines for their structure and minimum requirements for their content (including disclosure). This project may also be an opportunity to align existing IPSAS with the Conceptual Framework and International Statistical Standards.

Differential reporting

For less complex public sector entities, the costs of implementing IPSAS can be high. Stakeholders often request relief from the full requirements of the accrual-basis IPSAS. In this project, the IPSASB will explore:

• the characteristics of less complex public sector entities; and
• the appropriate financial reporting approaches and guidance that less complex public sector entities could apply.

A differential reporting project could support a broader range of public sector entities applying IPSAS and provide a base level of comparability between all entities applying either form of IPSAS.

Minor projects

Impairment of non-cash-generating assets

Determining whether and to what extent assets held for public sector specific purposes (for example, service delivery as opposed to profit-oriented activities) have been impaired is a common challenge in the public sector. The IPSASB’s current measurement project has identified inconsistencies when applying the concept of value in  measuring an asset’s impairment. Enhancing public sector specific guidance to clarify its application in practice once the new Measurement standard has been finalised would  benefit preparers.

Intangible assets

Several ongoing projects have identified public sector specific amendments that are likely to be necessary to the intangible asset’s standard (IPSAS 31) following their completion (i.e., in relation to measurement requirements and heritage items). The IPSASB would also have the unique opportunity to leverage its current projects ( particularly Natural Resources).

First-time adoption of accrual IPSAS

IPSAS 33 on First Time Adoption of Accrual IPSAS is applied when entities adopt IPSAS for the first time. Some challenges and inconsistencies have been identified in its application, and with more jurisdictions adopting accrual-basis IPSAS, addressing the problems will help promote adoption.

Practice Statement on making materiality judgements

Stakeholders consistently indicate  there is a lack of clarity on principles to consider when making materiality judgements on which information should be included in the financial statements. Rather than using judgement to decide what information to include in the financial statements, stakeholders tend to use disclosure requirements in IPSAS as if they were items on a checklist. As a result, entities provide too much irrelevant information and not enough relevant information in their financial statements. The International Accounting Standards Board^®  issued Practice Statement, Making Materiality Judgements, to address this issue. Using this as a basis to develop guidance for preparers will improve the quality of financial statements.

Have your say…

The Exposure Draft can be accessed by following this link. The Secretariat of the ASB will host a roundtable discussion on 1 October to discuss the IPSASB’s proposals. If you are interested in joining the discussion, please email Jeanine Poggiolini on jeaninep@asb.co.za.

Disclaimer

The article has been prepared by the Secretariat of the ASB for information purposes only. It has not been reviewed, approved, or otherwise acted on by the Board.